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Tesla, Stem boost business case for energy storage

High-power battery providers are wooing buyers including Adobe Systems and Extended Stay America hotels.

The practice of adding batteries to the grid for supply stability and pricing flexibility fascinates utility industry insiders.

Over the past 12 months, however, there has been an appreciable increase in interest from commercial accounts.

Still, much of that activity can be traced back to California — a state where the regulatory climate encourages experiments and where solar installations are helping drive interest. According to data from Navigant Research, the state accounted for almost half of all the projects announced during 2014 and early 2015.

But chatter is also building elsewhere. That’s in large part because the business applications for energy storage are becoming far more concrete.

Industrial-grade batteries can be an integral component of renewable energy deployments. Other energy storage applications represent more intelligent systems to manage corporate electricity consumption, on the terms of the business rather than the utility.

When all is said and done, another research forecast suggests that organizations in the United States could deploy up to 220 megawatts this year.

“Companies are seeing dynamic opportunities in energy storage,” said Matt Roberts, executive director of Energy Storage Association, in comments about the data. “Wholesale solutions have fueled the market in recent years, but behind-the-meter applications for storage are quickly accelerating.”

Betting big on batteries

Among the growing of big-name companies with energy storage projects that are either live or in the pipeline: software maker Adobe Systems, which is using the technology for demand response; and hotel chain Extended Stay America, which also talks up the energy management benefits. The technology the hospitality company uses across more than five dozen properties comes from Stem.

“The Stem system is invisible to our guests and our staff — it’s simply a great way to save on energy costs,” said Larry Fichuk, the company’s director of energy and sustainability, in a statement.

You also can thank Elon Musk’s Tesla Motors for focusing new attention on the trend.

In May, Tesla revealed plans to sell industrial batteries to businesses at a price of about $250 per kilowatt-hour. One of its first customers is Jackson Family Wines, the vineyard behind the La Crema and Kendall-Jackson labels.

The installation uses 21 stationary systems, or about 4.2 megawatts of total capacity, that work in concert with solar panels to smooth out electricity demand. The investment could help save $2 million over the next year alone.

Decreasing costs

Fundamentally speaking, several market forces are at work making energy storage projects far more feasible for commercial accounts.

For one thing, more capital is flowing into market participants. Tesla’s play in energy storage understandably generates plenty of headlines, but there are plenty of alternatives.

One high-profile example is the aforementioned Stem, which now has installations at more than 150 sites and counting. The company is in the middle of raising a Series C venture round that could reach $30 million. It already publicly has disclosed the first tranche: $12 million from Japan’s Mitsui.

Equally as intriguing are the funds forming to help businesses finance installations. In September, Stem arranged for more than $100 million from affiliates of New York investment firm B Asset Manager. Among other things, the funds will help back leases that give companies options for how to invest in the technology.

“The cost of capital is coming down quickly,” said Stem CEO John Carrington when I spoke with him in the spring. “We will need more capacity. The returns are better than solar.”

Another energy storage, Coda Energy, flipped its business model toward a similar focus two years ago after failing to find a footing as a provider of batteries for electric vehicles. Another player specifically seeking industrial and commercial customers is Green Charge Networks.

Last month, it disclosed a partnership with Nissan Motor Co. under which it will offer used lithium-ion EV batteries as a stationary storage option. The idea is to create a more cost-effective option for locations where incentives aren’t readily available to support investment costs.

“A lithium-ion battery from a Nissan LEAF still holds a great deal of value as energy storage, even after it is removed from the vehicle, so Nissan expects to be able to reuse a majority of LEAF battery packs in non-automotive applications,” said Brad Smith, director of the company’s 4R Energy business unit.

Another development that could affect commercial energy storage dramatically is new national legislation proposed by Martin Heinrich, the Democratic Senator from New Mexico.

The bill, the Energy Storage Promotion and Deployment Act of 2015 (PDF), would mandate installations by big electric utilities. The proposed amount: about 1 percent of peak load by 2021. Energy storage technology installed by a utility’s customer could be included as part of the minimum.

Right now, the bill is in committee. Considering that Congress has failed multiple times to pass a renewable energy target, it’s unlikely that the energy storage legislation will get very far. But it’s got people talking.

Looking for more information on leaders in the energy storage space? Don't miss VERGE 2015 Oct. 26-29 in San Jose, California.

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